2007 Interactive Registration Document - Renault

Useful lives are regularly reviewed, and accelerated depreciation is recorded
when an asset’s useful life becomes shorter than the initially expected period
of use, particularly when it is decided to withdraw a vehicle or part from the
market.
L – Impairment of assets
Signifi cant unfavourable developments on the markets in which Renault operates,
or signifi cant changes that adversely affect the circumstances and manner of
use of an asset, are the principal indications that an asset is impaired.
The recoverable value of assets is assessed at the level of each division. For
the Automobile division, the return on assets is measured taking all European
countries together, since the industrial plant and the product range throughout
Europe form one coherent unit. The return on industrial assets outside Europe is
measured for each coherent sub-unit that produces independent cash fl ows.
The recoverable value is the higher of an asset’s value in use and its net fair
value. Value in use is determined based on the discounted value of future cash
fl ows expected from use of the assets. These future cash fl ows are derived
from the business plan established and validated by Management, founded
on assumptions including the estimated shares of markets in which the Group
operates, and developments in product sale prices and the cost of purchased
components and raw materials. The pre-tax discount rate used is the average
weighted cost of capital as determined by Renault. For the year reported here
(2007) and the areas covered it is 10.1%, plus a risk premium for zones
outside Europe.
When recoverable value is lower than net book value, impairment equivalent to
the difference is recorded against the assets concerned and in the operating
margin.
M – Non-current assets or groups of assets held for sale
Assets held for sale are non-current assets or groups of assets that are available
for sale (and do not require signifi cant work to prepare them for sale) and very
likely to be sold.
Non-current assets or groups of assets considered to be held for sale are
measured and recorded at the lower of net book value or fair value less selling
costs. No further depreciation or amortisation is recorded once an asset is
classifi ed as held for sale (or included in a group of assets held for sale). These
assets are reported on a specifi c line of the balance sheet.
N – Inventories
Inventories are stated at the lower of cost or net realisable value. Cost
corresponds to acquisition cost or production cost, which includes direct and
indirect production expenses and a share of manufacturing overheads based
on a normal level of activity. Inventories are valued under the FIFO (First In
First Out) method.
When the net realisable value is lower than the value under the FIFO method,
impairment equal to the difference is recorded.
O – Assignment of receivables
Receivables assigned to third parties (through securitisation or discounting) are
removed from Group assets when the associated risks and benefi ts are also
substantially transferred to the third parties in question.
✦ Global Reporting Initiative (GRI) Directives
FINANCIAL STATEMENTS 07
CONSOLIDATED FINANCIAL STATEMENTS
The same treatment applies to assignments between the Automobile and Sales
fi nancing divisions. The resulting receivables and liabilities are recorded as
operating items.
P – Treasury shares
Treasury shares, including those held for the purposes of stock option plans
awarded to Group managers and executives, are recorded at acquisition cost
and deducted from Group shareholders’ equity until the date of sale.
T he sale price is directly included in consolidated shareholders’ equity, and
transferred to cash and cash equivalents once payment has been received.
Consequently, no gain or loss on treasury shares is included in the net income
for the period.
Q – Stock option plans/Free share attribution plans
The Group awards stock option plans (purchase and subscription options) and
share attribution plans, all for Renault shares. The grant date is the date at
which benefi ciaries are informed of the decision to grant these options or
shares, and the terms of the relevant plans. For plans subject to performance
conditions, an estimate of achievement of those conditions is taken into account
in determining the number of options or free shares attributed. This estimate is
reviewed annually based on changes in the probability of performance condition
achievement. The fi nal fair value of services rendered in return for attribution
of options or free shares is measured by reference to the fair value of those
options or shares at their grant date, using a binomial mathematical model.
Entitlements to attribution of free shares are valued based on the share value
at grant date less dividends expected during the vesting period.
The fair value is spread on a straight-line basis over the vesting period for the
relevant plan. The cost is included in personnel expenses, with a corresponding
adjustment to consolidated reserves. When the option is exercised, the cash
amount received by the Group in settlement of the exercise price is booked in
cash and cash equivalents, with a corresponding adjustment to consolidated
reserves.
In compliance with IFRS 2’s transitional measures, only plans beginning after
November 7, 2002 concerning options unvested at January 1, 2005 have been
valued and recorded as described above.
R – Provisions
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Pensions and other long-term employee benefit obligations
The Group’s payments for defi ned-contribution benefi t plans are recorded as
expenses for the relevant period.
For defi ned-benefi t plans concerning post-employment benefi ts, the Group
uses the Projected Unit Credit Method to determine the present value of its
obligations. Under this method, benefi ts are attributed to periods of service
according to the plan’s benefi t formula. However, if an employee’s service in
later years will earn a materially higher level of benefi t than in earlier years,
benefi ts are attributed to periods of service on a straight-line basis.
The future payments for employee benefi ts are measured on the basis of future
salary increases, retirement age, mortality and length of employment with the
company, and are discounted at a rate determined by reference to yields on
long-term high quality corporate bonds of a duration corresponding to the
estimated duration of the benefi t plan concerned.
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Registration Document Renault 2007 199